Mortgage calculator: enter your income, see the price of your home

A mortgage calculator should show more than a monthly payment

The first step in finding a mortgage is knowing what you can afford.

Down payments, interest rates, and house prices are all important. But another important factor is your income.

Higher income means you can afford more house. Is your income sufficient to buy a property in the neighborhood of your choice?

A good mortgage calculator can give you a general price range to check based on your income.

Just about any mortgage calculator can tell you how much it will cost per month to buy a home. But not many people can give you a recommended house price based on income.

Check your new rate (Nov 30, 2021)

Using the calculator’s income mode

Open a mortgage calculator that has an income mode (you can do that here). You specify your income and the regular monthly payments of your debts.

Add in a few other factors like the estimated interest rate and the length of the loan, and you see the price of the house and the monthly payment you can possibly afford. The following is an example of a mortgage calculator operating in income mode, assuming a 10% down payment.

Annual income can be the amount you earn on your own or household income if more than one person will help pay the mortgage. Monthly debt is the total of all the regular monthly payments you make on things like car loans, student loans, and credit cards.

“DTI” refers to the debt-to-income ratio, or the percentage of your income that goes to cover regular debt. It includes the mortgage and other debts.

Some lenders will consider higher DTIs of 43% or more. Many buyers aim for an DTI of 36% or less to leave room in their budget.

Then you indicate the interest rate, the loan term and the down payment. You can specify the latter either in dollars or as a percentage of the price of the house.

Plug in all numbers

Click on the “Advanced” link and you see three more categories:

  • Annual home insurance bill
  • Property tax
  • Homeowners Association (HOA) dues

The more complete the information you provide, the more accurate you get an estimate of the monthly payment and the maximum house price.

Income Based Mortgage Calculator Image 2a

Check out the real estate listing for any property you want to buy. It should itemize the home’s property tax bill, as well as HOA dues, if applicable.

Check your new rate (Nov 30, 2021)

Execution of simulation planning

A powerful feature of a mortgage calculator is the ability to consider different scenarios. For example, let’s say you’re about to get a raise and you’ll earn $ 73,000 per year instead of $ 70,000. Now you see the following:

Income Based Mortgage Calculator Picture 3

You are now eligible for a house price of approximately $ 16,000 more.

Maybe that’s not enough, however. You have considered buying a home with a loved one or family member. You want to see how their income could help you.

The other person earns $ 50,000 a year and has no debt. Adding their income makes a big difference in what you can buy.

Income Based Mortgage Calculator Image 3a

If you want to buy as much of a house as possible, consider buying it with a boyfriend, girlfriend, partner, or family member.

Current mortgage guidelines allow you to buy a home with anyone, even a business or unrelated partner.

Check your new rate (Nov 30, 2021)

Check the affordability of a 15-year mortgage

A 15-year mortgage comes with ultra-low rates. And you own your home for free and in half the time.

But, the payouts are higher. It’s a trade-off between monthly affordability and long-term cost reduction. Still, it’s worth checking out what your income will buy, based on a 15-year loan.

Income Based Mortgage Calculator Image 4a

Your monthly payment remains the same, but the price of your affordable home drops by about $ 80,000. It may not be a bad thing. Buying a more conservative home and paying for it earlier could make a lot of sense in the long run.

And when you look at the mortgage calculator’s amortization graph, you visually see the drastic difference between a 15- and 30-year loan.

Check your new rate (Nov 30, 2021)

See the loan repayment speed accelerated

All modes, including income, on a mortgage calculator should show the loan amortization over time. Comparing a 30-year to 15-year amortization reveals that you pay much less interest for the shorter loan term.

First, a depreciation chart for the 30 year option.

Income Based Mortgage Calculator Picture 5

Compare that to how quickly you pay off a mortgage with a 15-year loan.

You start your loan by paying considerably more principal, so your loan balance goes down quickly.

Income Based Mortgage Calculator Picture 6

At any time, click the “View Full Report” button to see a summary of loan information and a month-by-month table that shows how your payments are spread over time.

Income Based Mortgage Calculator Picture 7

Knowing how much equity you have at all times is good for general credit planning and in case you plan to move before you pay off the loan.

As you make mortgage payments, you pay off more principal each month

What are the rates today?

The prices are low and now is a great time to get a quote for your next purchase. The rates today are so low that you can buy more homes with the same income even compared to a few months ago.

Get a quote, which may take a few minutes. No social security number is required to get started, and all quotes come with access to your live credit scores.

Check your new rate (Nov 30, 2021)

Comments are closed.